McCain-Feingold Indian Giving Loophole

By Michelle Malkin (April 11, 2001)

A deep-pocketed special interest group remains curiously silent amid the furor over campaign finance “reform”: Indian tribes. Why?

You might think tribal leaders would be swarming Capitol Hill, joining other business groups and trade associations that are rightly worried about the McCain-Feingold bill’s deleterious effect on their ability to participate in the political process. Under McCain-Feingold, so-called “soft money” donations (which are currently unregulated and unlimited) would be banned. That would presumably be a big blow to Indian tribes, particularly those who run casinos, whose soft-money giving has exploded in the last few years.

In the 1996 election cycle, a Center for Responsive Politics report notes, Indian gaming interests gave over $1.5 million in soft money to national party committees. According to National Journal, six of the top 10 soft money donors among interest groups nationwide in 1999-2000 were Native American tribes. The No. 3-ranked Seminole Tribe of Florida donated $325,000, 85 percent of which went to the Democrats. After making the donations, the Seminoles gained approval for electronic gambling machines. The No. 5-ranked Mashantucket Pequot Tribe, operators of the gargantuan Foxwoods Casino in Connecticut, donated $319,000, 83 percent to the Democrats.

Final tallies are not in yet, but analysts say the top individual recipient of Indian gaming money during election 2000 was none other than anti-soft money crusader Sen. John McCain, R-Ariz., who sits on the Senate Committee of Indian Affairs.

So why aren’t Indian tribes raising hell over McCain’s soft-money ban? The answer lies in an obscure ruling by the Federal Election Commission last year, which was overlooked by the mainstream press cheerleaders for campaign finance reform and downplayed on Capitol Hill for self-interested reasons.

Responding to a request by lobbyists for the Oneida Indian Nation, a Democrat-leaning tribe which owns and operates the profitable Turning Stone Casino in Verona, N.Y., the FEC ruled unanimously that Indian tribes are not subject to the aggregate limit on annual giving by “individuals.” In one of those inexplicable Clintonesque legal interpretations, the FEC ruled that while a tribe is a “person” subject to individual limits on contributions to candidates, parties, and political action committees, it is not an “individual” subject to the current $25,000 limit on its annual total of contributions.

In other words, while Joe Donor is limited to giving 25, $1,000 hard-money donations to 25 candidates during an election cycle, the Oneida Nation or any other tribe can use tribal government funds to give unlimited “individual” donations of $1,000 each to an unlimited number of candidates. That cash is essentially soft money disguised as hard money. The bottom line is that Indian tribes, especially those flush with casino profits and other funds from corporate enterprises, gain an enormous leg up on other political donors.

The ruling “enables an Indian tribe to become a political cash register that can gulp ‘soft money’ from any source and disgorge it as ‘hard money’ contributions or expenditures,” explains Ed Zuckerman, editor of the PACs and Lobbies newsletter. Zuckerman concluded that the FEC gave tribes “a unique opportunity to earn transaction fees and commissions by utilizing their tribal accounts to launder soft money into a new form of hard money that might be called ‘political wampum.'” Zuckerman told me this week it is “quite possible, very possible” that this cozy little laundromat arrangement could pick up business dramatically if McCain-Feingold becomes the law of the land.

Nobody wants to question this special preference loophole for Indian tribes. It’s partly political correctness, but there’s a bigger factor: political protectionism. One critic in the small-business community, frustrated by the hypocrisy of campaign-finance crusaders, told me: “There’s a slush fund here that no one wants to talk about — or touch.”

Just goes to show you: The more things get “reformed” in Washington, the more they stay the same.